National solar mission: Government says Lanco Infratech flouted norms, but not involved in scam

Lanco Infratech flouted norms of the national solar mission, but made up for it after a warning issued by the government, informed a senior official with the ministry of new and renewable energy. After completing the investigation against Lanco, ministry denies any scam done by the company.

“Lanco had preferential shares in some companies, but after NVVN issued a warning in August 2011, they returned the shares,” said Tarun Kapoor, joint secretary, ministry of new and renewable energy.

The allegation against Lanco was that it had created front companies to bid for solar projects under the Jawaharlal Nehru National Solar Mission (JNNSM).

According to NVVN guidelines, parent company/promoter bidding under the JNNSM needs to have a 51% stake in the bidding company and preferential shares of other partners needs to be less than 49%. Lanco, however, held more than 51% preferential shares in several companies. “According to the legal advisers, such an amount meant carrying voting rights in the parent company, hence Lanco had to surrender its shares,” said an official of NVVN tracking solar mission. NTPC Vidyut Vyapar Nigam (NNVN) is the fully owned power-trading subsidiary of NTPC taking care of the sale and purchase of solar energy generated power.

The official also informed that Lanco returned the 51% preferential shares to the respective promoters of the companies by December 2011. The list of companies signing the PPA (Power Purchase Agreement) with NVVN under the phase 1, batch 1 of national solar mission came out in March 2011, which showed Lanco holding shares in seven companies. It was in August 2011, when NVVN investigated and issued notice against Lanco for violating the guidelines.

“According to the NVVN’s guidelines, if a default is reported against a participant company in the JNNSM, it is given a warning to correct it. Once corrected, it can very well go ahead,” said Kapoor.

Ministry, however, maintains it stand on the fictitious commissioning of solar power projects by Lanco in Rajasthan.

It encashed the bank guarantee of the projects procured by Lanco which failed to meet the deadline of commissioning solar power projects in Rajasthan under JNNSM.

“For four projects, 100% bank guarantee has been encashed which amounts to around 10 crore,” said Kapoor. Learning from the Lanco experience, NVVN has come up with stricter guidelines, especially regarding share holding pattern of the parent company. “NVVN has been extra cautious since then. It has decided the parent company’s share (sum total of equity and preferential share holding) should be more than 49%,” said Kapoor.

A senior NVVN official also told that the maximum limit of bidding was increased from 5 MW each in batch 1-50 MW each in batch 2 of phase 1 so that no illegal ways are taken to procure more projects. Lanco’s spokesperson denied to speaking on the issue saying that no official comment can be given unless they have the report in front of them. The investigative report, delayed by one month, is due to be released in the first week of April.

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